Aging U.S. population to reverse near-term deficit gains -CBO

WASHINGTON (Reuters) - The U.S. budget deficit will nearly double as a percentage of economic output between 2023 and 2038 as the costs to care for an aging population mount, if Congress does not reduce spending or boost revenues, the Congressional Budget Office warned on Tuesday.

In new long-term forecasts that will intensify the fiscal debate in Washington, the non-partisan CBO said near-term improvements in the U.S. debt and deficit outlook will be quickly reversed in coming decades under current law.

While the deficit as a percentage of gross domestic product is still forecast to fall to a sustainable two percent in 2015 from 3.9 percent this year because of a recovering economy, it will soon start rising again. CBO projected that with no changes in tax and spending laws, the deficit will reach 3.3 percent of GDP by 2023 and hit 6.4 percent by 2038.

Publicly held debt, now at 73 percent of GDP, will show a similar trajectory under the CBO's assumptions, falling to 68 percent by 2018, then climbing to 100 percent by 2038.

While the CBO, Congress' budget referee agency, has long warned of ballooning long-term deficits, the forecasts come as lawmakers race against a Sept. 30 deadline to pass new government spending authority to prevent a government shutdown as the next fiscal year gets underway.

Congress also faces a mid-October deadline to raise the $16.7 trillion federal debt limit to avoid a potential default. The deadlines have also become intertwined with Republicans' desire to delay or defund "Obamacare" health insurance reforms.

"The report reiterates the obvious: Government spending, especially on health care, is driving our debt. And Obamacare will not solve the problem. The law was a costly mistake," House of Representatives Budget Committee Chairman Paul Ryan, a Wisconsin Republican, said in a statement.